Traditional Economy - Ms. Arndt's Class
Traditional Economy
What is a traditional economy? In a Traditional Economy, people get good things they need to live (like a house, cows or tools) by inheritance. These things people need to live are called resources. Inheritance is when a parent dies and gives property to the children. Traditional Economies use basic prehistoric tools and methods of work that are low technology.
What type of work? The most important job or work in this economy is agriculture. Most people spend time farming. Many changes are happening in countries with this economic system. Many are changing to other types of economies to modernize.
Where is this type of economic system? Some under-developed South American nations like Papa New Guinea and Brazil, and a few countries in Africa and Asia still use a traditional economic system.
What groups of people have a traditional economy? Many places with indigenous population have a Traditional Economy. Indigenous people are the people who originally lived in an area. They did not move there. One example of indigenous people are the Pygmies who live in the Congo region in Central Africa. About 400 million indigenous people across the world use a traditional economy.
What are the benefits (good things) or pros of this type of economy? There are some benefits from Traditional Economy. People feel like a team: a sense of unity. They also feel a social bond and connection because they are not angry and hostile. Everybody feels like they are a part of the community and everybody works. Unemployment---when people do not have jobs---is low. The crime rate is also low because people have to be busy working. Each person is his own boss.
What does it look like? Animal grazing (like cows, sheep, goats), gathering food, hunting and cultivation/agriculture form the basis of this economy.
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Command Economy
What is a Command or Planned Economy? In a Command Economy or Planned Economy, the central or state government makes all the decisions about production or what to make. The government also decides who gets to use or have what is made in factories. The government decides who gets money and how much each person will earn. The government has workers who are planners. The planners decide which work or labor the people will do.
What countries have a command economy? China and former Soviet Union (now Russia) are perhaps two of the best examples of Command Economy. Though many countries today are changing from Planned Economy to a Mixed Economy, nations like North Korea and Cuba are some countries where Planned Economy still occurs.
In case of a Command Economy, both state-owned and private businesses receive direction and commands from the government about construction projects, the amount to produce, how a product should be made and course of their actions.
Characteristics of a Command Economy:
A Command Economy is more stable because the government decides everything, not market demand. It is least affected by financial downturns and depressions. There is not much extra and unemployment rates are low. Money is spent on big infrastructure projects like roads and bridges.
- - Command Economy is opposite to a Market Economy. Command Economic system uses careful planning of the entire money-making process and supply of goods.
- Command Economy emphasizes more on community benefits, rather than the requirements of a single individual. A worker’s pay is distributed on the basis of all workers getting paid the same.
Market Economy
What is a Market Economy? A market economy is characterized by the voluntary exchange of goods and services. (Goods are things you can hold and touch like a shirt or TV and a Service is work someone else does for you like a teacher or a house cleaner) without government interference. Supply and demand determine what is produced and how much it will cost. Supply is how much of a product is available to buy. Demand is what consumers want to buy. Producers or manufacturers evaluate what consumers (people who buy things) would like and then they make it. This is the opposite of a Command Economy.
What countries have a Market Economy? The United States, Canada, Germany, Japan, Australia and Switzerland and many other nations in the world have market economies. There are no (or very few) government interventions such as price fixing, quotas (number to be made) and industry funding.
What are the advantages to a market economy? A free market economy has efficient resource distribution, its main advantage. In a market economy, people can own property and resources. The market economy in the United States is not completely free: companies cannot form monopolies (only one company sells something) and consumer safety laws help protect people
What are some disadvantages to a market economy? There may be concentration of wealth in few pockets of the economy where people have done a very good job and so earned much more than others. People earn more if they have better job skills and are educated. People without good skills in a market economy might be poor and may need government welfare. The market economy operates to satisfy individual wants and society as a whole may not feel the benefits.
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Mixed Economy
What is a mixed economy? A mixed economy has elements of both market economy and command economy are found. There is private economic freedom with centralized planning with a common goal of avoiding the problems associated with both market as well as command. Government's regulation and licensing policies/rules influence economic activities.
Which countries have a Mixed Economy?
It is difficult to define a country's economy as capitalist, socialist, or mixed. But as the experiences tell, the role of the Government has increased very fast after the worldwide depression in the early 20th century.
Most countries that were once the best examples of a Capitalist economy are considered mixed type today. The Untied states is a great example of a mixed economy. For example, people can sell food in a store but it must meet certain health standards first.
What are some characteristics of a mixed economy? In a mixed type economy, both the private ownership as well as the state takes part in the means of production, distribution and other types of economic activities. A feature of a market economy is allowing private participation and competition in production to make a profit
Source:
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The Government tells you that you will sell brooms and you will sell them for $5.
The Government doesn’t care if you don’t like selling brooms or if you want to sell them for $10, you must sell them for $5.
Amazon can sell whatever it wants and however much it want and the owner can make whatever money he wants.
Walmart is privately owned and can hire anybody they want and sell anything it wants
But the government tells them they may not sell certain items and how much they must pay workers
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